Release Date: July 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record-breaking quarter with $20.3 million in revenue, up 76% from the previous year.
- Gross profit margin increased to 62% from 54% due to higher margin direct-to-consumer sales and cost reduction efforts.
- Net income improved to $2.1 million from a net loss of $1.1 million in the previous year.
- Cash and cash equivalents increased to $24.8 million from $20.5 million at the end of the previous fiscal year.
- No current or long-term debt, providing financial stability and flexibility.
Negative Points
- Operating expenses increased to $10.6 million from $7.2 million, driven by higher variable selling costs and increased marketing spend.
- The sustainability of the celebrity endorsement advertising model may face diminishing returns over time.
- Challenges in scaling production capacity quickly to meet potential future demand.
- Decision not to dedicate additional monetary resources to domestic law enforcement market due to subpar return on investment.
- Delay in the launch of the smaller launcher product, now expected in the second half of 2025.
Q & A Highlights
Q: What sort of traction levels are you seeing as you add newer influencers to your advertising program? How do you think about adding more advertising influencers at this point and the ROAS that you're expecting to get from each new one?
A: Bryan Ganz, CEO: We are currently using a 5X ROAS as the threshold for both existing and new celebrity endorsers. If they do not meet this threshold, we do not continue to support their efforts. So far, all new celebrity endorsers are achieving the same ROAS levels as the original ones.
Q: Can you provide insights on the early traction and plans for expansion into television advertising?
A: Bryan Ganz, CEO: We started with Newsmax and have seen a strong return on advertising spend. We've also been approached by other smaller networks, with mixed results. The effectiveness depends on the audience, specifically those willing to use non-lethal options for self-defense.
Q: What should we expect for gross margins and operating expenses in the next quarter or two?
A: Lauri Kearnes, CFO: We are working on initiatives like lean manufacturing and SKU rationalization, which should lead to slight improvements in gross margins. Operating expenses should remain fairly stable, with variable expenses around 10% of sales.
Q: Could you elaborate on the production side? What do you expect production levels to be by the end of the year?
A: Bryan Ganz, CEO: We hit 18,000 units per month in May and expect to maintain this level for the rest of the year. We are selling closer to 12,000-13,000 units per month, allowing us to build inventory for Q4. We plan to increase production further in 2025.
Q: When do you expect the smaller launcher to be released?
A: Bryan Ganz, CEO: The smaller launcher will not be out by the end of this fiscal year. Development is on track, and we expect it to be released in the second half of 2025.
Q: Is there any thought to breaking out operating expenses into different categories like sales and marketing?
A: Lauri Kearnes, CFO: Yes, we could look into breaking out the variable expenses, sales, and marketing to provide a clearer understanding of the components.
Q: Can you provide a breakdown of the $10 million in quarterly operating expenses?
A: Bryan Ganz, CEO: Approximately $2 million are variable costs, $3 million for DTC business, $0.5 million for professional costs, $3.5 million for people costs, and $1 million for other expenses.
Q: What are the plans for expanding production capacity?
A: Bryan Ganz, CEO: We are increasing our production capacity and building a US-based ammunition production facility to meet growing demand, reduce supply chain risks, and ensure high-quality rounds. This facility should be operational by year-end.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
